After recent months of slowing economic data (which has come under question of even being real) and potential defaults, the International Monetary Fund (IMF) warned China that their decades of poor investment and systemic financial risk could cause a hard economic landing.
However, China’s Vice Finance Minister Zhu Guangyao said “in general, we think they are a very professional financial institution, but some of the methodology used and some traditional thinking, they also need reform.” This has not been the first time the IMF has received this type of criticism, but China has a history of unsavory economic policies.
Economic data has been under fire by Western economists for being faked. There have been large discrepancies in import and export data, as well as overall gross domestic product data. Premier Li Keqiang has admitted to the data as being more of a “guideline.” In 2013, China expanded 7.4 percent on paper, but economist believe the more realistic figure is 6.4 percent.
IMF Managing Director Christine Lagarde said the the risks of a hard landing are limited, but that China would need to address the misallocation of resources while continuing to reign in the large shadow banking industry.
“We hope that their analysis and methodology can really reflect a country’s reality,” said Zhu. The reality is that China is in a tough situation right now.
After several months of contracting manufacturing and export data, market participants were very anxious (almost excited) for a Chinese stimulus package. The People’s Bank of China (PBOC) Governor Yi Gang said that China would have to be cautious on implementing any type of stimulus.